Article by Mhairi
The FCA is set to make pension advice easier by introducing new performance data requirement on pension providers.
The proposals are backed by the Department for Work and Pensions (DWP) and The Pensions Regulator (TPR). Pension providers will be required to publish annual data to their customers which details their overall performance including costs and service standards.
The data will be colour coded so that it’s easy to understand. Green for good performance through Amber and then Red for poor performance. The idea is to set performance comparison benchmarks and then allow customers to see at a glance whether their provider is doing well or not.
The FCA says that in terms of performance for example, over 5 years a pension pot could grow up to 45% more with a better performing provider than with a poorly performing provider.
This should allow customers to make an easier informed decision to switch and to encourage pension providers to focus much more on their customer outcomes. This should be a good thing. It will also assist advisers when they provide pension advice to look beyond just performance but to a wider range of service-related indicators. We’ve done this for years, but a new standard colour coded assessment should make it easier to explain recommendations.
There have been measures in place for a while now but targeted at pension advice providers rather than at customers. The Best invest Dog Funds list has been going for over 10 years now looking at the worst performing investment funds in the market.
Service levels are important for pension advice.
We particularly welcome the introduction of service level measures. Service is one of the areas which frustrates us most. Whilst the measures haven’t been finalised yet, with input still ongoing from industry bodies needed to set them. We’d be interested in call answering standards, data request timescale measures and complaint handling reporting.
Check your tax relief.
It would be nice if HMRC automated all tax relief on pensions at the same time. Currently higher rate tax payers have to physically claim back the additional tax relief on pension contributions above the basic rate. All basic rate taxpayers receive their tax relief automatically.
Pension provider Penfold estimates that hundreds of millions in tax relief is going unclaimed. Check whether you have received yours. Tax relief can also be claimed for previous years.
Taking pension advice is increasingly important.
According to JP Morgans chief market strategist, advisors should start modelling retirement plans for younger people without factoring a state pension. This might seem alarmist, but Karen ward believes that its inevitable that the state pension for everyone will have to end. The cost of pensions will become too high in an ageing economy with less tax revenue and less workers.
Many financial advisors agree with this and are already modelling less or no state pensions for under 50’s.
For women the need for pension advice is even more important. An Edinburgh University report into women’s finances has found that women on average have 75% less in their pensions at age 60 than men. The University made a series of recommendations to help change this going forward. One of which was for women to get more specific pension advice early in their careers.
Performance indicators for advice firms?
It might not be a bad idea to introduce a traffic light system for advice firms as well, although this is not currently on the table. For example, New Model Adviser recently looked at Fisher Investments who currently advertise on TV and have over 15,000 UK clients. They advertise that they trat clients as individuals, but research found that most clients were invested in their Global Total Return equity fund regardless of their circumstances. Perhaps not surprising from a restricted advice firm. But shouldn’t this be made clear?
Get more information.
If you need pension advice then why not contact Christina today. She offers a free initial meeting to discuss your requirements and explain how our service works. You are under no obligation to use us after that if you don’t want to and we won’t pester you.
So why not call us today on 01282 614444 or e mail us enquiries@ccfps.co.uk or use our contact form online.
